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EXHIBIT 8.1
OPINION OF XXXXXXXX & XXXXXXXX AS TO THE MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER.
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[SHEARMAN & STERLING LETTERHEAD]
June 24, 1999
Synetic, Inc.
River Drive Center 0
000 Xxxxx Xxxxx
Xxxxxxx Xxxx, X.X. 07407
Agreement and Plan of Merger by and among
Synetic, Inc., Xxxxxx Xxxxxx Sub, Inc. and Medical Manager Corporation
dated as of May 16, 1999
Ladies and Gentlemen:
You have requested our opinion as to certain United States
federal income tax consequences of the contemplated merger (the "Merger") of
Xxxxxx Xxxxxx Sub, Inc. ("Merger Subsidiary"), a Delaware corporation and a
direct wholly-owned subsidiary of Synetic, Inc. ("Parent"), a Delaware
corporation, with and into Medical Manager Corporation (the "Company"), a
Delaware corporation. The Merger will be consummated pursuant to the Agreement
and Plan of Merger by and among Parent, Merger Subsidiary and the Company dated
as of May 16, 1999 (the "Merger Agreement"). Unless otherwise defined,
capitalized terms used herein have the meanings assigned to them in the Merger
Agreement. At your request, in connection with the filing of the Registration
Statement, we are rendering our opinion concerning certain federal income tax
consequences of the Merger.
In connection with rendering our opinion, we have reviewed the
Merger Agreement, including the Exhibits thereto, the Joint Proxy
Statement/Prospectus constituting part of the Registration Statement on Form S-4
filed by Parent and the Company with the Securities and Exchange Commission on
June 18, 1999, as it may be amended through the date hereof, and such other
documents and corporate records as we have deemed necessary or appropriate as a
basis therefor. We have assumed that the representations and warranties
contained in the Merger Agreement were true, correct and complete when made and
will continue to be true, correct and complete through the Effective Time, and
that the parties have complied with and, if applicable,
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will continue to comply with the covenants contained in the Merger Agreement. We
have assumed that the Merger will be consummated in accordance with the terms of
the Merger Agreement and the laws of the State of Delaware. We also have assumed
that statements as to factual matters contained in the Joint Proxy
Statement/Prospectus are true, correct and complete, and will continue to be
true, correct and complete through the Effective Time. Finally, we have relied
on the representations made by Parent, Merger Subsidiary and the Company and
covenants contained in tax certificates attached hereto as Exhibits A and B,
dated June 23, 1999, and we have assumed that such representations will continue
to be true, correct and complete through the Effective Time and that such
covenants will be complied with in all material respects.
Based upon the foregoing, in reliance thereon and subject
thereto, and based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury Regulations promulgated thereunder, judicial decisions,
revenue rulings and revenue procedures of the Internal Revenue Service, and
other administrative pronouncements, all as in effect on the date hereof, and
assuming that the Merger and related transactions will be consummated in
accordance with the terms of the Merger Agreement, it is our opinion that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code, and that each of Parent, Merger Subsidiary and the Company will be a
party to such reorganization within the meaning of Section 368(b) of the Code.
It is also our opinion that the discussion set forth under the caption "Material
Federal Income Tax Consequences of the Merger" in the Joint Proxy
Statement/Prospectus, insofar as such discussion constitutes statements of
United States federal income tax law or legal conclusions, subject to the
assumptions, limitations and qualifications set forth therein, is a fair and
accurate summary of such matters. There can be no assurance that contrary
positions may not be asserted by the Internal Revenue Service.
No opinion is expressed as to any matter not specifically
addressed above, including the accuracy of the representations or reasonableness
of the assumptions relied upon by us in rendering the opinion set forth above.
Our opinion is based on current United States federal income tax law and
administrative practice and we do not undertake to advise you as to any future
changes in United States federal income tax law or administrative practice that
may affect our opinion unless we are specifically retained to do so. We consent
to the use of this opinion as an Exhibit to the Registration Statement and to
the reference to Xxxxxxxx & Xxxxxxxx under the caption "Material Federal Income
Tax Consequences of the Merger" in the Proxy Statement/Prospectus.
Very truly yours,
/s/ Xxxxxxxx & Xxxxxxxx
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EXHIBIT A
MEDICAL MANAGER REPRESENTATION LETTER
June 23, 1999
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
On behalf of Medical Manager Corporation (the "Company"), the
undersigned, in connection with the opinion to be delivered by you pursuant to
section 7.02(c) of the Agreement and Plan of Merger (the "Agreement"; terms used
but not defined herein have the meanings ascribed to them in the Agreement)
dated as of May 16, 1999 among Xxxxxx Xxxxxx Sub, Inc. ("Merger Subsidiary"), a
direct wholly-owned subsidiary of Synetic, Inc. ("Parent"), Parent and the
Company, hereby certifies that, to the extent the facts relate to the Company to
his knowledge and after due diligence, and to the extent otherwise without
knowledge to the contrary,
1. The Merger will be consummated in compliance with the terms
of the Agreement and, except for waivers and modifications disclosed to Shearman
& Sterling, none of the material terms and conditions therein have been waived
or modified, and the Company has no plan or intention to waive or modify any of
such terms and conditions.
2. Except as otherwise disclosed to Xxxxxxxx & Xxxxxxxx, the
representations and warranties with respect to the Company contained in Article
III of the Agreement are true and correct in all material respects.
3. The fair market value of the Parent Common Stock and other
consideration received by each shareholder of the Company will be approximately
equal to the fair market value of the Company Common Stock exchanged in the
Merger.
4. At least 50 percent of the value of the shareholders'
proprietary interests in the Company will be preserved as a proprietary interest
in Parent received in exchange for Company Common Stock. For purposes of this
representation, proprietary interests will not be preserved to the extent that,
in connection with the Merger: (i) an extraordinary distribution is made with
respect to the stock of the Company; (ii) a redemption or acquisition of stock
of the Company is made by the Company or a person related to the Company; (iii)
Parent or a person related to Parent acquires stock of the Company for
consideration other than Parent stock; or (iv) Parent redeems its stock issued
in the Merger. Any reference to Parent or the Company includes a reference to
any successor or predecessor of such corporation, except that
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the Company is not treated as a predecessor of Parent. A corporation will be
treated as related to another corporation if they are both members of the same
affiliated group within the meaning of Section 1504 of the Code (without regard
to the exceptions in Section 1504(b)) or they are related as described in
Section 304(a)(2) of the Code (disregarding Treas. Reg. Section 1.1502-80(b)),
in either case whether such relationship exists immediately before or
immediately after the acquisition. Each partner of a partnership will be treated
as owning or acquiring any stock owned or acquired, as the case may be, by the
partnership (and as having paid any consideration paid by the partnership to
acquire such stock) in accordance with that partner's interest in the
partnership. As used in this representation letter, the term "partnership" shall
have the same meaning given to it in Section 7701(a)(2) of the Code.
5. Following the Merger, the Company will hold at least 90
percent of the fair market value of its net assets and at least 70 percent of
the fair market value of its gross assets and at least 90 percent of the fair
market value of Merger Subsidiary's net assets and at least 70 percent of the
fair market value of the Merger Subsidiary's gross assets held immediately prior
to the Merger. For purposes of this representation, amounts paid by the Company
or Merger Subsidiary to shareholders who receive cash or other property, amounts
used by the Company or Merger Subsidiary to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by the
Company will be included as assets of the Company or Merger Subsidiary,
respectively, immediately prior to the Merger.
6. The Company has no present plan or intention to issue
additional shares of its stock that, assuming the Merger is consummated, would
result in Parent losing control of the Company within the meaning of section
368(c) of the Internal Revenue Code. For this purpose, the term "control" means
the ownership of stock possessing at least 80 percent of the total combined
voting power of all classes of stock entitled to vote and at least 80 percent of
the total number of shares of all other classes of stock of the corporation.
7. Except as otherwise provided in the Agreement, each of the
Parent, Merger Subsidiary, the Company and the shareholders of the Company will
pay their respective expenses, if any, incurred in connection with the Merger.
8. There is no intercorporate indebtedness existing between
Parent and the Company, or between Merger Subsidiary and the Company, that was
issued, acquired or will be settled at a discount.
9. Following the Merger, Company will continue its historic
business or use a significant portion of its historic assets in a business.
10. Except for transfers permitted under Section 368(a)(2)(C)
of the Internal Revenue Code and Treasury Regulations Section 1.368-1(d),
Company has no plan or intention to liquidate; to merge after the Merger with or
into another corporation; to sell or issue stock
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of Company after the Merger to persons other than Parent; to sell or otherwise
dispose of any of its assets or of any of the assets acquired from Merger
Subsidiary, except for dispositions made in the ordinary course of business; or
to reaquire directly, or indirectly through any of its subsidiaries, any of the
stock of Parent.
11. At the time of the Merger, the Company will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in the Company that, if
exercised or converted, would affect Parent's acquisition or retention of
control of the Company, as defined in section 368(c) of the Internal Revenue
Code.
12. The Company is not an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
13. On the date of the Merger, the fair market value of the
assets of the Company will exceed its liabilities plus the amount of
liabilities, if any, to which the assets are subject.
14. The Company is not under the jurisdiction of a court in a
Title 11 or similar case, within the meaning of section 368(a)(3)(A) of the
Internal Revenue Code.
15. In the Merger, shares of Company stock representing
control of the Company, as defined in section 368(c) of the Code, will be
exchanged solely for voting stock of Parent; for purposes of this
representation, shares of Company stock exchanged for cash or other property
originating with Parent will be treated as outstanding Company stock on the date
of the Merger.
16. None of the compensation received by any
shareholder-employees of the Company will be separate consideration for, or
allocable to, any of the shares of Company Common Stock.
I understand that Xxxxxxxx & Xxxxxxxx, as counsel for Synetic,
Inc., will rely on this representation letter in rendering its opinion
concerning certain of the federal income tax consequences of the Merger, and I
hereby commit to inform them if, for any reason, any of the foregoing
representations ceases to be true prior to the Effective Time.
MEDICAL MANAGER CORPORATION
BY: /s/ Xxxxxxxxx X. Xxxx
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Name: Xxxxxxxxx X. Xxxx, Xx.
Title: Vice President & General
Counsel
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EXHIBIT B
SYNETIC, INC. REPRESENTATION LETTER
June 23, 1999
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
On behalf of Synetic, Inc. ("Parent") and Xxxxxx Xxxxxx Sub,
Inc. ("Merger Subsidiary"), a direct wholly-owned subsidiary of Parent, the
undersigned, in connection with the opinion to be delivered by you pursuant to
section 7.02(c) of the Agreement and Plan of Merger (the "Agreement"; terms used
but not defined herein have the meanings ascribed to them in the Agreement)
dated as of May 16, 1999 among Merger Subsidiary, Parent, and Medical Manager
Corporation (the "Company"), hereby certifies that, to the extent the facts
relate to Xxxxxx and Xxxxxx Xxxxxxxxxx to his knowledge and after due diligence,
and to the extent otherwise without knowledge to the contrary,
1. The Merger will be consummated in compliance with the terms
of the Agreement and, except for waivers and modifications disclosed to Shearman
& Xxxxxxxx, none of the material terms and conditions therein have been waived
or modified, and Parent has no plan or intention to waive or modify any of such
terms and conditions except as otherwise disclosed to Shearman & Sterling.
2. Except as otherwise disclosed to Shearman & Xxxxxxxx, each
of the representations and warranties of Synetic and Merger Sub contained in the
Merger Agreement are true and correct as of the date hereof as though made on
and as of the date hereof (except to the extent expressly made as of an earlier
date, in which case as of such date), except where failure to be so true and
correct would not have, individually or in the aggregate, a Synetic Material
Adverse Effect.
3. The fair market value of the Parent Common Stock and other
consideration received by each shareholder of the Company will be approximately
equal to the fair market value of the Company Common Stock exchanged in the
Merger.
4. At least 50 percent of the value of the shareholders'
proprietary interests in the Company will be preserved as a proprietary interest
in Parent received in exchange for Company Common Stock. For purposes of this
representation, proprietary interests will not be preserved to the extent that,
in connection with the Merger: (i) an extraordinary distribution is made with
respect to the stock of the Company; (ii) a redemption or acquisition of stock
of the Company is made by the Company or a person related to the Company; (iii)
Parent or a
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person related to Parent acquires stock of the Company for consideration other
than Parent stock; or (iv) Parent redeems its stock issued in the Merger. Any
reference to Parent or the Company includes a reference to any successor or
predecessor of such corporation, except that the Company is not treated as a
predecessor of Parent. A corporation will be treated as related to another
corporation if they are both members of the same affiliated group within the
meaning of Section 1504 of the Code (without regard to the exceptions in Section
1504(b)) or they are related as described in Section 304(a)(2) of the Code
(disregarding Treas. Reg. Section 1.1502-80(b)), in either case whether such
relationship exists immediately before or immediately after the acquisition.
Each partner of a partnership will be treated as owning or acquiring any stock
owned or acquired, as the case may be, by the partnership (and as having paid
any consideration paid by the partnership to acquire such stock) in accordance
with that partner's interest in the partnership. As used in this representation
letter, the term "partnership" shall have the same meaning given to it in
Section 7701(a)(2) of the Code.
5. Following the Merger, the Company will hold at least 90
percent of the fair market value of its net assets and at least 70 percent of
the fair market value of its gross assets and at least 90 percent of the fair
market value of Merger Subsidiary's net assets and at least 70 percent of the
fair market value of the Merger Subsidiary's gross assets held immediately prior
to the Merger. For purposes of this representation, amounts paid by the Company
or Merger Subsidiary to shareholders who receive cash or other property, amounts
used by the Company or Merger Subsidiary to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by the
Company will be included as assets of the Company or Merger Subsidiary,
respectively, immediately prior to the Merger.
6. Prior to the Merger, Parent will be in control of Merger
Subsidiary within the meaning of section 368(c) of the Code. For this purpose,
the term "control" means the ownership of stock possessing at least 80 percent
of the total combined voting power of all classes of stock entitled to vote and
at least 80 percent of the total number of shares of all other classes of stock
of the corporation.
7. Parent has no present plan or intention to cause the
Company to issue additional shares of its stock that, assuming the Merger is
consummated, would result in Parent losing control of the Company within the
meaning of section 368(c) of the Internal Revenue Code.
8. Parent has no plan or intention to reacquire any of its
stock issued in the Merger.
9. Except for transfers described in Section 368(a)(2)(C) of
the Internal Revenue Code and Treasury Regulations Section 1.368-1(d), Parent
has no plan or intention to liquidate Company; to merge Company with or into
another corporation; to sell or otherwise dispose of the stock of Company; or to
cause Company to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Merger Subsidiary, except for dispositions made in the
ordinary course of business.
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10. Merger Subsidiary will have no liabilities assumed by
Company, and will not transfer to Company any assets subject to liabilities, in
the Merger.
11. Except as otherwise provided in the Agreement, each of the
Parent, Merger Subsidiary, the Company and the shareholders of the Company will
pay their respective expenses, if any, incurred in connection with the Merger.
12. There is no intercorporate indebtedness existing between
Parent and the Company, or between Merger Subsidiary and the Company, that was
issued, acquired or will be settled at a discount.
13. Following the Merger, Parent will cause Company to
continue its historic business or use a significant portion of its historic
assets in a business.
14. Neither Parent nor Merger Subsidiary is an investment
company as defined in section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue
Code.
15. On the date of the Merger, the fair market value of the
assets of the Company will exceed its liabilities plus the amount of
liabilities, if any, to which the assets are subject.
16. The Company is not under the jurisdiction of a court in a
Title 11 or similar case, within the meaning of section 368(a)(3)(A) of the
Internal Revenue Code.
17. In the Merger, shares of Company stock representing
control of the Company, as defined in section 368 (c) of the Code, will be
exchanged solely for voting stock of Parent; for purposes of this
representation, shares of Company stock exchanged for cash or other property
originating with Parent will be treated as outstanding Company stock on the date
of the Merger.
18. None of the compensation received by any
shareholder-employees of the Company will be separate consideration for, or
allocable to, any of the shares of Company Common Stock held by such
shareholder-employees.
19. Parent does not own, nor has it owned during the past five
years, any shares of stock of Company.
20. The payment of cash in lieu of fractional shares of Parent
Common Stock will be solely for purposes of avoiding the expense and
inconvenience to Parent of issuing fractional shares and does not represent
separately bargained for consideration.
21. Parent has not adopted or modified any stock repurchase
program in connection with the Merger.
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I understand that Xxxxxxxx & Xxxxxxxx, as counsel for Synetic,
Inc., will rely on this representation letter in rendering its opinion
concerning certain of the federal income tax consequences of the Merger, and I
hereby commit to inform them if, for any reason, any of the foregoing
representations ceases to be true prior to the Effective Time.
SYNETIC, INC.
BY: Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Vice President
